Telecommunications problems: Aditya Birla Grp will not face funds or tender

Mumbai: the Aditya Birla Group Bank funds will not be denied or prohibited by insolvent companies if Vodafone idea they had to breach and go into bankruptcy proceedings since there were no corporate or promoter guarantees issued by the conglomerate to the telecommunications firm, bankers say.

When a company faces insolvency proceedings, promoters cannot raise funds for other businesses, nor are they eligible to bid for a bankrupt business under Section 29A of the Bankruptcy Law. Effective as of December 1, the guarantors of any insolvent business also face bankruptcy proceedings.

Of Aditya Birla Group companies, Grasim Industries has the largest stake of 11.6%, followed by Hindalco Industries (2.6%) in the telecom firm, which is not generating enough money to meet its liabilities. Overall, the Birla Group has a 18.5% stake, while Vodafone The group owns 53.6% of the company.

Given Vodafone idea ’s shareholding pattern, an insolvency proceeding against the company would not bar most Aditya Birla Group companies from being a bidder for other companies under the insolvency process.

Last week, Aditya Birla Group chairman Kumar Mangalam Birla had said Vodafone Idea He will have to close the store in the absence of government help after the directive of the Supreme Court last month that requires the telecommunications giant to pay the fees of Rs 40,000 crore in 90 days.

“It is true we will shut shop if we don't get relief ... because there is no company in the world that can pay that kind of fine in three months; it just doesn't work like that, ”Birla had said at an HT event. The chief of Vodafone’s UK parent, too, had voiced a similar feeling. Nick read , Vodafone ’s global CEO, had said that the joint venture may have to be liquidated, citing unsupportive legislation and excessive taxes. Vodafone idea had reported the country’s highest loss of Rs 50,921 crore for the quarter ended September after the Supreme Court order. The company has a debt of over Rs 1 lakh crore.

Emkay Finance, in a research report last month, said that Grasim was under no obligation to bail out Vodafone . “According to our calculations, in the worst-case scenario, the impact (of Vodafone idea ) on Grasim’s stock price would be Rs 187 per share,” the report said.

According to a note by Edelweiss research, banks have approached Vodafone idea for the payment of the outstanding debt due to covenant breach, but the company has declined it for now. There is no acceleration in the payment of bank debt yet. Since then, Vodafone idea and Bharti Airtel have filed a review petition in the Supreme Court.

Lenders say that they have not yet taken a call on the action they will take should their guarantees on behalf of Vodafone to the government get invoked and they crystallise into debt. If lenders deny further funds, the likelihood of insolvency proceedings is high.